A Landlord’s Unreasonable Refusal to Grant Consent

Even where the lease permits a certain use, planning permission for that use could be required, regardless of the fact that the lease permits that use. Leases also commonly contain provisions which prevent the tenant applying for planning permission without the landlord’s consent.

Rotrust Nominees Ltd v Hautford Ltd [2018] was the first reported decision which considered whether or not a landlord unreasonably withheld consent in refusing to permit the tenant to apply for planning permission for a change of use.

In this case, the property was a terraced building which comprised of a basement and ground floor (used for retail purposes), a first and second floor (used as offices or purposes ancillary to the retail use) and a third and fourth floor (used for residential purposes). The building formed part of a larger estate which was owned by the Landlord.

The property was subject to a long lease to the Tenant. The lease provided that the property could be used for "one or more of the following purposes (a) a retail shop (b) offices (c) residential purposes (d) storage (e) studio.". The lease also included a tenant’s covenant “not to apply for any planning permission without the prior written consent of the Landlord such consent not to be unreasonably withheld".

The Tenant wanted to use the first and second floors for residential purposes (in addition to the third and fourth floors) and applied to the Landlord for consent to apply for planning permission to change the use of the first and second floors of the property to residential use.

The Landlord refused to allow the Tenant to apply for planning permission. The Landlord argued that allowing this use would increase the prospect of a successful claim for enfranchisement under the LRA 1967 (- under the LRA 1967 a 'qualifying tenant' of a house may become entitled to buy the freehold of the building). Therefore, the Tenant would have an increased chance of making a claim to purchase the freehold of the building in the future as a larger area of the building would be used for residential purposes. In addition, enfranchisement would be detrimental to the Landlord’s management of the estate.

At first instance, it was held that the Landlord was unreasonable in withholding consent because the Landlord was trying to impose a restriction on the use of the property when that use was permitted under the user clause of the lease and the Landlord’s management interests could have been protected by way of the inclusion of a restrictive covenant in the transfer of the freehold if enfranchisement occurred.

The Landlord appealed this decision but the Court of Appeal also held that the Landlord had been unreasonable. One of the reasons put forward was that the user clause permitted residential use without the Tenant having to obtain the Landlord’s consent and the Landlord should not be permitted re-write the user clause. In addition, any person could apply for planning permission to change the use of the property and if such an application was successful then the Tenant would be able to rely on that planning permission. The Court also held that the purpose of the consent clause did not include protecting the Landlord from enfranchisement and estate management considerations could be met by imposing restrictive covenants on the transfer of the freehold. The Landlord’s refusal to grant consent was unreasonable as the Landlord was seeking to achieve a collateral purpose.

The Landlord sought permission to appeal to the Supreme Court but this was refused and so the Tenant was free to apply for planning permission.

This case makes it clear that a Landlord’s fear of enfranchisement would not necessarily be a reasonable ground for refusing consent. It serves as a reminder that future potential uses of a property should be considered before the lease is completed. However, each case would depend on its specific facts.

Posted on: 30/05/2018

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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